Cheap feed, brisk U.S. pork exports drive Iowa hog barn expansion

CHICAGO (Reuters) - Farmers in Iowa, where a third of U.S. hogs are raised, have ratcheted up swine barn construction while capitalizing on low-cost feed and thriving U.S. pork exports.

Higher profits have prompted pork producers to build new packing plants. Iowa Department of Natural Resources (DNR) data shows that this has pushed permits for pig buildings in Iowa to a five-year high as farmers look to house record numbers of U.S. hogs.

“The main factors for increased pork investment in buildings are attractive feed costs and very strong exports,” said Gregg Hora, a hog farmer in Fort Dodge, Iowa.

Hora is not adding space to his swine farms, but said others are doing so given the annual U.S. hog herd growth of 3 to 4 percent, tied to robust global demand for pork.

DNR’s 2017 statistics showed approvals for construction of new hog barns capable of holding more than 1,250 head, and expansions of existing ones, totaled 451, up nearly 12 percent from 2016.

The U.S. hog herd reached an all-time high 73.2 million head as of Dec. 1, 2017, according to the U.S. Department of Agriculture.

U.S. corn prices are hovering around $3.50 per bushel, well under the all-time high exceeding $8 in 2012, when there was an historic drought in the Midwest.

U.S. Meat Export Federation data showed U.S. pork exports from January through November of 2017 were on pace for a new volume record at 2.23 million tonnes valued at $5.9 billion.

Hog farmer profit improved after new packing plants sprang up in the United States last year.

Industry slaughter capacity in 2017 grew 8 percent versus 2016 after new or revamped facilities came online in Minnesota, Michigan, Missouri and Iowa, said John Nalivka, president of Oregon-based Sterling Marketing.

He expects capacity to rise another 6 percent in 2018 when another Iowa plant comes online.

“A solid hog market coupled with low-cost feed have allowed producers to make money while chasing this capacity,” he said.

He calculated that farmers last year on average made about $21 per head on hogs sold to packers versus $5 the year before.

Shoppers are embracing plentiful budget-friendly pork chops and bacon, with robust demand expected this year thanks to the booming U.S. economy.

“The thinking is that the ‘wealth effect’ on demand will be more than sufficient to gobble up all that meat - despite the big supplies,” said Chicago Mercantile Exchange livestock futures trader Dan Norcini.